Ambuja Cements – Q3FY24 Result Update

Ambuja Cements Ltd. Shines in Q3: Strong Revenue and Profit Surge

Sector Outlook – Positive
This quarter, the company’s revenue and profit significantly surpassed expectations, thanks to strong demand and strategic market management. They saw a notable increase in sales and benefited from lower fuel costs, which boosted their profits. 
The company’s focus on blending cement contributed to an impressive sales volume, with energy and logistical costs decreasing. However, a temporary production halt led to higher raw material expenses. 
Sales were strongest in the northern and eastern regions, with the company operating at 77% capacity. They’re also expanding their green energy capacity, aiming for a significant increase by March 2024.

Concall Highlights

• The company added a 3.3MT clinker capacity in Madhya Pradesh and acquired Sanghi Industries, increasing capacity by 6.6MT. This contributes to 10MT of the planned 40MT.
• Aims for a total grinding capacity of 140MT by FY2028 and plans to finish other clinker capacities of 4MT by Q2FY26.
• Pursuing self-sufficiency in coal with bids for coal mines, recently winning a 2MT coal mine in Maharashtra.
• Ordered 11 wagons for efficient clinker transport and 26 wagons for fly ash transport; 98% of the fleet is GPS tagged for optimised routing.
• Secured bids for 10 limestone mines, boosting reserves to 586MT.
• Maintenance on three big kilns impacted production and costs but is expected to normalise.
• Focused on micro-market strategies and expanded the dealer network for revenue growth.

Valuation and Outlook
Ambuja Cements Ltd. reported solid performance this quarter, helped by lower fuel costs and rising demand, leading to increased revenue. This success was partly due to expanding their dealer network and focusing on market management strategies.

Transport costs also decreased thanks to more efficient logistics. The company anticipates maintaining sales volumes, expecting cement demand to grow by 7-8%. Initiatives in green energy are expected to improve profit margins. 

The acquisition of Sanghi Industries will boost sales volumes and revenue. Ambuja’s strategic acquisitions of coal and limestone mines will reduce costs and enhance margins, presenting a positive outlook for the company’s future.